Following the tragedy of the Grenfell Tower fire in June 2017, the widespread use of dangerous, inappropriate cladding materials on multi-storey buildings was brought to the attention of the market and the regulators. In the near six years since, buildings with existing cladding have awaited assessment by specialists to determine whether the materials used meet the new, stricter fire-safety requirements, with many buildings needing to have cladding removed and replaced with safer alternatives. The result, a vast class of buildings (along with their owners and occupiers) left in limbo – while they first await assessment and then, if required, works to remove old and install new materials. Understandably, the investor appetite immediately waned for buildings awaiting the required certification evidencing the use of suitable materials (and indeed for buildings requiring significant capital expenditure to rectify problematic cladding), alongside a quickly reduced pool of lenders prepared to lend on such assets.
Various Government schemes have assisted with the cost of rectification works, together with legislative changes requiring developers to undertake works on newer buildings, however, the cladding issue should not be forgotten by investors seeking to invest in the ever-attractive UK residential market. The message, raise enquiries early and discuss issues with preferred lenders.